SM Energy presses ahead in Powder River Basin with addition of 30K acres

SM Energy Co. (NYSE: SM) increased its footprint in the Powder River Basin by an additional 30,000 acres, the company said August 12. The acreage, acquired in Q313, brings the Denver, CO-based oil and natural gas company’s total Powder River Basin acreage to roughly 140,000 net acres.

Nearly 102,000 of the Wyoming acres acquired as part of a swap with an undisclosed party for a similar acreage position in the company’s DJ Basin properties are prospective for the Frontier formation of the Southwestern Powder River Basin.

Admitting that the company “never really had a result that it was really enthusiastic about” in its Niobrara acreage, president and COO Jay Ottoson said the company has moved across its Powder River Basin acreage to target the Frontier formation, reported analysts at PLS Inc. in April.

Around that time, SM Energy bought an additional 42,000 net acres in the Powder River Basin from QEP Resources for $65 million, adding to its acreage positions in Converse and Johnson Counties.

The deal deal brought SM Energy’s acreage position to 105,000 net acres, with nearly 60% of SM Energy’s pro forma acreage in the basin targeting the Frontier formation with 69 net drilling locations.

Fast forward and we see the company sitting on roughly 140,000 net acres in the area and highlighting four of its wells from the oil-producing Frontier formation (including two operated) that currently trend above the company's 1.07 MMboe type-curve (65% oil), said Global Hunter Securities (GHS) analysts in a research note Tuesday. “The most recent well – the Loco Federal in the Northern half portion of SM's position – averaged 1,408 boepd over 30 days, which, along with positive results from other operators, delineates the play to the North,” they said.

The buy is viewed favorably by GHS analysts, who noted it was “positive to see SM pressing ahead in the PRB with solid results to show for it, as the company ramps to two rigs by year-end. Well costs are likely to remain the focal point here in our view (currently running at >$14MM D&C) but solid results to date (~1 MMboe+ type-performance on several wells across a large swath of acreage) do show promise going forward.”

 

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